[ I N D E P T H | E T F s ]
Consolidated tape Along with diluted on-exchange liquidity , the lack of a consolidated tape in Europe means ETF traders cannot see the volumes taking place off-exchange , in effect blinding them .
“ In Europe and the UK , only ETF trades that are traded on-exchange are published and it pretty much ignores 90 % of the transactions in Europe , which is pretty crucial . A consolidated tape is essentially going to show both on-exchange and off-exchange , how many deals are happening ,” says Li .
“ If you want to understand the true liquidity of an ETF and understand how much volume is going through it - investors currently do not have full visibility . They know in the US but they do not know in Europe . The consolidated tape is something that everybody wants .”
" If you go for discretionary management , you are trusting the skill and judgement of that portfolio manager or investment team ."
HOWIE LI , HEAD OF ETFS , LEGAL & GENERAL INVESTMENT MANAGEMENT
While there is no concrete correlation between the number of active ETF launches and a consolidated tape , in offering participants more transparency on the volumes taking place on and off-exchange this could encourage more active strategy-based ETFs to take hold in Europe .
The European Commission recently pushed for the establishment of a consolidated tape in the European primary and secondary bond markets in its upcoming MiFID II review following pressure from market participants . Any concrete action on this is yet to be seen .
Ultimately active ETFs have a way to go before they are welcomed with open arms in Europe in the same way that they have been in the US . However , evidence has shown that they are on the rise and the line between active and passive is continuously moving .
As the face of the ETF continues to evolve , investors will have the opportunity to dip their toes into various pools , picking and choosing tailored investment vehicles that contain a flavour of both active and passive strategies .
“ It is a question of how you want to access an active manager ’ s ideas . If you can use an ETF to perhaps do that , that might be the preferred choice for clients and end-investors ,” concludes HSBC ’ s Palmer .
Issue 67 // thetradenews . com // 69